On Financial Post

Seven years ago, workers at the Harmac pulp mill near Nanaimo defied the odds and hung onto their jobs at a time when so many of their counterparts at other mills in British Columbia were losing theirs.

Each worker scraped together $25,000 and three local investment groups pooled resources to save the pulp mill from being closed. Today it is one of only a few left on B.C.’s coast.

By the end of 2012, thanks to the sacrifice of its workers and prudent investments by its management team, Harmac’s 320 union and salaried employees received dividends for the first time since the employee-led rescue operation.

You don’t hear success stories like this often, but you could. One option is for the provincial government to embrace new policies that encourage more domestic manufacturing, policies that also enhance the strength of existing mills like Harmac.

Despite obvious successes, significant challenges still remain for the pulp mill, challenges that Arnold Bercov, head of the Public and Private Workers of Canada (formerly the Pulp, Paper and Woodworkers of Canada) believes must be overcome if the mill is to continue to thrive.

What distresses Bercov is the enormous number of raw, unprocessed logs that leave British Columbia’s coast each year, aided by export policies that act as a disincentive to investments in new mills that would put people back to work.

In B.C., logs deemed “surplus” to domestic needs can be exported. Bercov says such policies actually encourage certain companies to take the easy way out — to close mills, put people out of work and export logs rather than make forest products here at home.

Last year, B.C. companies exported 6.26 million cubic metres of raw, unprocessed logs. Most went to buyers in China. Exporters included companies that are solely in the business of selling raw logs, companies that own some mills but that used to own many more and some First Nations who have no nearby mills to purchase their logs. To put such exports into perspective, carpenters could frame nearly 165,000 average-size North American homes with that much wood.

But B.C.’s and Canada’s economy isn’t just smarting from such lost economic opportunities. Equally problematic is the perverse outcome our export policies have on mills such as Harmac.

It could be said that B.C.’s log-export policies actually subtract, rather than add, value from logs.

Now, B.C.’s dearth of sawmills means that Harmac is forced to get nearly 600,000 cubic metres of wood per year — roughly one third of its total raw material needs — from running whole logs directly through giant chipping machines. The practice is expensive and represents a huge loss in potential forest industry jobs in B.C.

Instead of logs first being turned into lumber products at mills where hundreds of people could be working, and then shipping the so-called “waste” from those sawmills to pulp mills, massive numbers of logs are exported, forcing companies into the uneconomic and wasteful practice of directly chipping logs.

More troubling, hemlock logs are among the most commonly exported. China last year alone purchased more nearly three million cubic metres of hemlock, a species that must be dried to achieve maximum value and for which pulp mills with all the energy and heat they produce are ideally suited to do.

Harmac’s management team would like nothing better than to see a sawmill built nearby and more mills on the Coast, Bercov says. Mills focused on processing hemlock logs from second-growth as opposed to old-growth forests. But for that to happen, the provincial government needs to rethink its export policies.

One way to do that, Bercov argues, is for the province to encourage companies to work actively with First Nations on new joint ventures by hiving off a portion of what is logged annually and declaring that such wood is unavailable for export and must be assigned through special bidding processes to new partnerships between First Nations and forest companies.

It’s time to stop subtracting value from our forests by allowing raw-log exports based on a false and dangerous “surplus” test, Bercov says.

Instead, let’s embrace a new future where we actually log less and process more, where logs pass through many hands here at home rather than directly through our hands to China.

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